Ca Real Estate Exam Study Guide Group 6

Front 1

with regard to valuation and appraisal, generally in the past

Back 1

cost

Front 2

with regard to value, contract term

Back 2

price

Front 3

worth (estimated by appraisal)

Back 3

value

Front 4

an estimate or approximation of market value, supported by relevant data

Back 4

appraisal

Front 5

how long is an appraisal good for?

Back 5

24 hours

Front 6

highest probable price that a property should bring when a willing seller would sell and a willing buyer would buy if the property were exposed for a reasonable period of time (aka arms length transaction)

Back 6

Fair Market Value

Front 7

number agreed upon

Back 7

fair market price

Front 8

what determines value?

Back 8

D-demand/desire
U-utility/usefullness
S-scarcity/supply
T-transferrability (not for sale/no value)
in order of importance:
USDT (united states dist. atty)

Front 9

what are the influences on value?

Back 9

P-physical
E-economic
G-governmental, ie taxes (police, fire, school)
S-Social

Front 10

subjective value is...

Back 10

personal value aka value in use

Front 11

value that reasonable people would agree on

Back 11

objective value aka value in exchange

Front 12

relating to land, the principal that asks "is this the most appropriate building for this land?"

Back 12

Principal of highest and best use

Front 13

this principal is the most important concept in appraisal and forms the basis of the sales comparison method

Back 13

principal of substitution

Front 14

what are the two factors in the princ. of substitution?

Back 14

1. value of a property is determined by what it would cost to find a comp
2. two properties are similar and one costs less, it will sell first

Front 15

principal of supply and demand

Back 15

if demand is greater than supply, the value increases and it's a seller's mkt;
if supply is greater than demand then value decreases and it's a buyers market

Front 16

principal that asks:
what you are willing to pay today based on the anticipation of future benefitis like income and appeciation (this only applies to income producing properties)

Back 16

the principal of anticipation

Front 17

states that a property reaches greatest value when around similar properties

Back 17

conformity

Front 18

states that the value is reduced if surrounded by properties of lesser value

Back 18

regression

Front 19

states that the value is enhanced because of surrounding properties being more valuable

Back 19

progression

Front 20

combining 2 lots under one ownership

Back 20

assemblage

Front 21

first step in the appraisal process

Back 21

define the problem, "why are we appraising?"

Front 22

methods of appraisal

Back 22

cost approach
sales comparison approach
income approach

Front 23

if the comp is superior to the subject, we subtract and vice versa

Back 23

sales comparison approach, used in single family homes

Front 24

in the sales comp. approach, do we make adjustments to the subject or the comp?

Back 24

always make adjustments to the comps, never the subject

Front 25

this approach is used with unique buildings

Back 25

cost approach

Front 26

method for finding value in the cost approach

Back 26

cost to build the project today-accrued depreciation+land value=appraised value

Front 27

replacement v. reproduction

Back 27

similar in utility vs. exact replica

Front 28

the most detailed, most complex method of establishing cost value. Not cost effective

Back 28

quantity survey method

Front 29

method where all pieces are added together

Back 29

unit in place method

Front 30

most commonly used method

Back 30

square foot method

Front 31

least accurate method

Back 31

index method

Front 32

loss of value from any cause

Back 32

depreciation

Front 33

types of depreciation

Back 33

physical deterioration
functional obsolescence
economic obsolescence

Front 34

study depreciation chart

Back 34

see notes

Front 35

this approach treats the real estate as if it were an income producing property

Back 35

income approach

Front 36

how do you calculate income capitalization?

Back 36

value of capital x cap rate = income;
value: I/R=V
income: I =RV
cap rate: R=IV

Front 37

know the 7 steps in property analysis

Back 37

see notes

Front 38

how do you calculate the gross rent multiplier?

Back 38

value: Gross rent x GRM=value
income: value/grm=gross rent
grm: fross rent/value

Front 39

states that retail space is priced by frontage feet,not square feet because the footage worth decreases as you go back

Back 39

4321 rule

Front 40

this says to give weight to the appropriate approach based on the conditions

Back 40

reconciliation

Front 41

what is FIRREA?

Back 41

the financial institutions reform, recovery and enforcementr act

Front 42

4 stages of appraisers

Back 42

1. appraisal trainee
2. state licensed appraiser
3. certified residential appraiser
4. certified general appraiser

Front 43

in transfer of property, this is a representation of the land

Back 43

deed

Front 44

to give title

Back 44

delivery

Front 45

to accept the title

Back 45

acceptance

Front 46

real property is transferred by this

Back 46

deed (most common type of title)

Front 47

giving up the deed

Back 47

conveyance

Front 48

taking up the deed

Back 48

acquisition

Front 49

4 types of deeds

Back 49

grant deed
quit claim deed
warranty deed
involuntary deed

Front 50

history of owners all the way back to origin

Back 50

chain of title

Front 51

this insures all the way back to origin

Back 51

title insurance

Front 52

person conveying the title

Back 52

grantor

Front 53

person recieving the title

Back 53

grantee

Front 54

most commonly used deed in CA, used when people buy title insurance

Back 54

Grant Deed

Front 55

a grant deed has two implied warrantees. what are they?

Back 55

1. grantor has not previously conveyed title to anyone else
2. if there are any encumbrances, visible or not, they'll be disclosed

Front 56

does a grant deed say yuou own the RE because of the title insurance?

Back 56

no

Front 57

this deed has no warranties

Back 57

quit claim deed

Front 58

if you don't have title insurance (dumb), insist seller warrants that they do have title using this

Back 58

warranty deed

Front 59

this deed is given for love an affection

Back 59

gift deed

Front 60

when the property is taken away fro mthe person

Back 60

involuntary deed

Front 61

3 types of involuntary deeds

Back 61

sherrifs or marshalls deed
trustees deed
tax deed

Front 62

this deed follows judicial forclosure or judgement

Back 62

sherrifs or marshalls deed

Front 63

this deed is nonjudicial forclosure under a trustees sale

Back 63

trustees deed

Front 64

this deed follows tax sale if the owner were deliquent on property tax for 5+ years and property would be sold at auction

Back 64

tax deed

Front 65

6 essential elements for a valid deed

Back 65

1. must be in writing
2. must be executed by the grantor
3. grantor must have capacity to grant (18+ or em. minor)
4. there must be a granting clause
5. must be an adequate description of property
6. must identify the grantee

Front 66

know this...

Back 66

"a grant is considered executed when signed, and effective when delivered"

Front 67

2 types of title insurance policies

Back 67

1. standard coverage- CLTA (CA land title Assoc) protects from matters of record
2. ALTA (American LTA) protect from unrecorded easements and liens etc.

Front 68

someone who buys property in good faith

Back 68

a bonafide purchaser (BFP)

Front 69

who owns the land?

Back 69

whoever is the good faith buyer or BFP AND records first

Front 70

see recording examples

Back 70

in notes

Front 71

only 2 people are allowed to talk about taxes, who are they?

Back 71

accountants & attorneys
RE agents can't give advice!

Front 72

property taxes are governed by what?

Back 72

Prop 13 in CA

Front 73

calculate tax

Back 73

assessd value x tax rate = tax
ex 2%/yr x 1% = .25 local

Front 74

two most important things about prop 13

Back 74

1. it is assumed that the sales price is the best indicator of value. Iimits the increase the state can make on a properties asesses value to 2%/year
2. state can't charge more than 1% on tax rate
(local can also have a tax rate of apx .25%)

Front 75

the average tax rate on the test

Back 75

1.25 %

Front 76

what is the fiscal year?

Back 76

7/1-6/30

Front 77

property tax due dates

Back 77

Nov. 1 due and Dec. 10 deliquenet
Feb. 1 due and Apr. 10 deliquent
(NDFA no damn fooling around)

Front 78

what is the transfer tax?

Back 78

.55/$500

Front 79

know how to calculate the transfer tax owed

Back 79

see notes
sales price-assumption of existing loan all divided by 500 and then x .55

Front 80

two categories of income tax

Back 80

ordinary income (higher tax rate)
capital gain (lower tax rate)

Front 81

the cap gains tax has an exclusion up to..

Back 81

250,000 single
500,000 couple (if both filed tax returns) see sample in notes

Front 82

this states that for properties used to proved income, held as investment or for business, sell to buy another property, you can defer the taxes on the sale

Back 82

1031 exchange

Front 83

cost, whatever the investor has put into the property

Back 83

basis

Front 84

improvements do this to basis

Back 84

increase vs. depreciation which decreases basis

Front 85

calculate adjusted basis

Back 85

basis + improvements - depreciation = adjusted basis

Front 86

work a 1031 exchange problem

Back 86

find in book, see notes

Front 87

cash recieved, mortgage relief

Back 87

boot